U.K.'s Tight Labor Market Is Holding Back Growth, BOE SaysBy
U.K. companies are finding it harder and harder to hire the right people and it’s having an impact on the pace of economic growth, according to a Bank of England report.
That’s bad news for the U.K., which is already among the slowest-growing Group of Seven economies. It’s forecast to expand 1.5 percent this year and next, weaker than the euro area and the U.S.
In a broad report based on surveys of companies published Wednesday, the BOE said recruitment difficulties were “elevated” and “remained a primary concern” among companies. The U.K. jobless rate is at its lowest in over four decades and employment is at a record high.
The BOE added that the industries reporting skill shortages now include hospitality, warehousing, agriculture and food, adding to a list that already covered construction, engineering, software development, professional services and logistics. It blamed this on reduced availability of European Union workers, on which these sectors rely.
While the impact of recruitment difficulties on pay has been limited, the BOE noted that settlements are running a bit higher this year than in 2017 -- at between 2.5 percent to 3.5 percent. That’s playing into the thinking among BOE policy makers, who have set the stage for an interest-rate increase in May, after they hiked for the first time in a decade in November.